In Order To Be Profitable, You Need To Remove The Greed Factor

Source: redbubble.com

Greed is good, but only if it’s gonna make you as much money as possible. Having aspirations of becoming a billionaire is kinda greedy because the average person can live off of $12 million from birth up until their death at the age of 100 (most people die about 20–30 years before the age of 100 due to a number of factors), never having to worry about working or money for any reason at all. However, having billions of dollars puts you in a situation where your descendants will never have to worry about money into perpetuity.

Greed is not good when it makes you lose money. If you do the math, and can maintain this average over 1 whole trading year (about 250 days), you can do a lot starting out with an account size of $200. It can be done in one trade or multiple trades.

Let’s say you are focusing on a daily profit of 5% per day in around 5 trades or less with an account size of $200. This means all you need to do is focus on making $10 on one trade, $2.00 on 5 trades, or anything in between. Keep in mind that you’re not trying to get rich off of one trade, just make a small percentage each and every day. In 250 days, the profit will start at $10.00 and end in over $19 million (after taxes).

If this sounds bogus, this is compound interest on a daily basis. This is something we have not been told about when it comes to personal finances. We’ve been told that day trading is a place where you lose money or it’s simillar to gambling. Well, if you have the skill and ability to make $19 million with $100, you have the ability to make money on scales you’ve never seen in your whole entire life.

“This is fantasy talk. How are you gonna make $19 million with just $100?

Focus on daily, small consistent profits instead of getting the most out of one trade. Once you hit your daily profit goal for he day, close the app and don’t trade until the next day. If you do jump into a trade, it should with such a small insignificant amount that if you take a loss, it would not give too much money back to the market. If you made your profit for the day, you could probably take another trade with 1 share just to see if you can get a few extra pennies of profit. If you take a loss, it will be around a few pennies.

Will you take losses? Of course because day trading is risky and you may get things wrong sometimes. However, you’re more focused on an exit strategy than before. A lot of traders will get into a trade with a large number of shares and stay into the trade too long. When the price goes against them, they stay in to see if the price goes back in their favor. Before they know it, they lose $120 on a single trade (ask me how I know). When you have an exit strategy, you have a goal of when to sell no matter how high the price spikes up.

Let’s say you want to make $10 on the trade, so you go in with 50 shares so you can make $10 when the price increases $0.20 per share. If you’ve picked the right stock, and it shoots all the way up to $5.00 over the price from where you’ve sold, you need to be okay with leaving all that money on the table.

Let me elaborate on the whole “leaving money on the table” issue. There have been times I took a profit of around $1.00 per share (more or less) and the price ended up spiking well over my profit after I sold. There have been times where the price was around $20 or more over the price from where I sold. This “leaving money on the table” issue has had me staying in trades longer to see if the price would spike up the way the other trade has done previously, and I can say for sure that this has lead me to taking huge losses and getting into losing streaks of a few days.

As far as the “leaving money on the table” issue goes, you need to ask yourself,

“What’s more important — having your account increase immensely over a long period of time or chase the “lightning in a bottle” trades and lose a lot of money along the way.”

I like to think of stock market day trading as putting money into an aggressive savings account. The best part is you can grow your account without the need of adding extra money the way you would for your savings account at your bank. If you are taking smaller losses than your profits, your account can grow significantly fast compared to a retirement plan you’ve been contributing to for 40 years through your 401K. Daily returns are infinitely superior to monthly and annual returns.

Let’s say you can’t reach $19 million in 250 days, but you make $100,000. I still think you came out of on top being that you started out with $200. If you decided to live off of your $100,000 through day trading, by going for 2% daily profits, that’s $2,000 per day ($1,000 after taxes), which means you’re netting $20,000 per month.

As you can see, greed actually hinders your success in day trading.